IRS Provides Updates on ERC Claim Processing and Fraud Enforcement

The Internal Revenue Service (IRS) recently issued a News Release that provides an update on its efforts to process the backlog of pending Employee Retention Credit (ERC) claims while also targeting ERC fraud. Targeting ERC fraud has been among the IRS’ top enforcement priorities in 2024, and its enforcement efforts have led to hundreds of criminal cases against businesses and their owners. Learn more from Washington D.C. tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.

Intensifying Audits, Disallowance Letters and Criminal Investigations

In its August 8, 2024 News Release, the IRS highlights several of its ongoing initiatives focused on uncovering and penalizing ERC fraud. While the IRS is closely scrutinizing pending claims for a variety of “warning signs” of fraud, it is also reevaluating claims it has already paid. According to the News Release, some of the IRS’ recent efforts have included:

• Sending 28,000 disallowance letters to businesses “whose [ERC] claims showed a high risk of being incorrect;”
• “Intensifying audits” and initiating thousands of reviews focused on all forms of ERC fraud; and,
• Initiating nearly 500 criminal ERC fraud cases working alongside the U.S. Department of Justice (DOJ).

The IRS is also working to process pending ERC claims, though it is doing so “methodically and deliberately” with the goal of ensuring that it does not add to the billions of dollars in improper refunds already paid. While this means that businesses that have submitted valid ERC claims should receive payments eventually, it also means businesses that may have submitted invalid claims need to be proactive about resolving these claims before they trigger an audit or investigation.

Mitigating Risk While Ensuring Payment: Key Considerations for Business Owners

Taking these considerations into account, what can—and should—business owners do going forward? Depending on a business’s specific circumstances, options may include:

• Appealing an Improper ERC Disallowance – In its News Release, the IRS acknowledges that it has made at least some errors in disallowing businesses’ ERC claims. If you believe that the IRS improperly denied your business’s ERC claim, your next step may be to file an appeal.
• Withdrawing an Invalid ERC Claim – If your business submitted an invalid ERC claim and its claim is still pending, your best option in this scenario may be to file for withdrawal.
• Amending a Partially Invalid ERC Claim – If only a portion of your business’s ERC claim is invalid or your business incorrectly calculated its credit, an amended filing may be warranted.
• Submitting a Voluntary Disclosure – If you have concerns about facing allegations of intentional ERC fraud (or attempted ERC fraud), effectively mitigating your risk may involve filing a voluntary disclosure.
• Defending Against an Audit or ERC Fraud Investigation – For business owners who are already facing scrutiny from the IRS, effectively defending against the audit or ERC fraud investigation will be essential for avoiding unnecessary consequences.

Discuss Your Options with Washington D.C. Tax Lawyer Kevin E. Thorn

If you need to know more about your ERC-related options, we invite you to get in touch. Please call 202-349-4033 or contact us online to request an appointment with Washington D.C. tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.